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4.5d. The Four Ps – Place Summary

  • Place
    • How a product reaches its end user/customer from the manufacturer
  • Distribution channels
    • The different ways the product reaches the customers
    • Has different levels depending on how many steps are required before the product reaches the customer
    • Zero level distribution
      • Manufacturer sells directly to consumers
      • E-commerce makes this more simple, feasible, cost effective and have a wider market coveragee.g. restaurants, Apple, car manufacturers
      • Types of direct marketing
        • Telesales and marketing
          • More expensive
          • Direct to consumer, pitch and add more products
          E-commerce
          • Cheaper, less cost
          • Wide market coverage
          Direct mail or email
          • Cheapest (no specialized skill involved)Usually ignored, low success rate
          Vending machines
          • Physical product can be seen, attracts more customers
          • Cost of machinery
          • Prone to theft and vandalism
        Advantage: business has control over price, how product is sold, etc.Disadvantage: more costly
      One level distribution
      • Manufacturer to retailer to consumer
      • Advantage: product can reach more markets because of many retailers
      • Disadvantage: less control
    • Two level distribution
      • Manufacturer to warehouse/wholesaler to retailer to consumer
      • Can be one level if consumers purchase directly from warehouse
  • Intermediaries
    • Wholesalers – buy products in bulk, sell to retailers
    • Direct agents – independent businesses w/ exclusive right to trade a product in a territory; agents may act on behalf of buyer or seller
    • Retailers – outlets that sell directly to customers
  • Distribution Strategy
    • Most businesses will use multichannel distribution strategies
    • This is affected by:
      • Cost and benefits of each level of distribution
      • Nature of products
        • Perishables are best at zero or one level
        • FMCG’s are best at bulk wholesalers
        Type or size of market
      • Urgency of use of the product
      Firms must decide on the type of distribution that is most suitable
      • Intensive (mass produced products)Selective (positioning or branding)Exclusive (for large investment or premium products)
      Vertical integration is possible, but not usually feasible/cost-effective
    • Branding will give products leverage against power of distribution channels

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